Exercise 104 Presented below are changes in the account bala

Exercise 104

Presented below are changes in the account balances of Wenn Company during the year, except for retained earnings.

Increase
(Decrease)

Increase
(Decrease)

Cash

$28,540

Accounts payable

$35,860

Accounts receivable (net)

(17,130)

Bonds payable

(22,600)

Inventory

51,060

Common stock

63,010

Plant assets (net)

46,890

Paid-in capital

16,480

The only entries in Retained Earnings were for net income and a dividend declaration of $17,030.

(a)

Compute the net income for the current year.

Solution

Increase in Assets = Increase in Cash - Decrease in Accounts Receivable + Increase in Inventory + Increase in Plant Assets
Increase in Assets = $28,540 - $17,130 + $51,060 + $46,890
Increase in Assets = $109,360

Increase in Liabilities = Increase in Accounts Payable - Decrease in Bonds Payable
Increase in Liabilities = $35,860 - $22,600
Increase in Liabilities = $13,260

Increase in Assets = Increase in Liabilities + Increase in Equity
$109,360 = $13,260 + Increase in Equity
Increase in Equity = $96,100

Increase in Equity = Increase in Common Stock + Increase in Paid-in Capital + Increase in Retained Earnings
$96,100 = $63,010 + $16,480 + Increase in Retained Earnings
Increase in Retained Earnings = $16,610

Increase in Retained Earnings = Net Income - Dividend Paid
$16,610 = Net Income - $17,030
Net Income = $33,640